Interview: Dwi Soetjipto
What areas will Pertamina focus its development strategies on with a new administration in place?
DWI SOETJIPTO: The global petroleum industry is going through a period of turbulence as a result of low international oil prices. At home, meanwhile, we must address the shortage in the energy supply. Pertamina has put together five strategic pillars to serve as a basis for company activities in the coming years. The first pillar is to develop our upstream business, given that Pertamina only holds 23-24% of national oil production at present. We want to increase this share to more than 40% in the next five years, and to more than 50% in the next 10 years. Moreover, we are focused on increasing production both domestically and overseas to fill the current gap between demand and supply. Our target is to produce 1.6m barrels per day (bpd) within a decade.
The second pillar is to pursue operational efficiency. In doing so, we are looking to boost efficiency in procurement, refineries, distribution and transportation, and marketing. The third pillar is to increase our oil refining capacity. Pertamina is the national oil and gas company, and as such we have a mandate to meet Indonesia’s energy needs. We currently import around 50% of our national demand, and this gap will continue to increase around 3-5% annually. Therefore, we must upgrade our existing refinery capacity from 800,000 bpd to 1.6m bpd. Pertamina also has plans to build new refineries, thereby bringing total capacity up to more than 2m bpd by 2025. Further to this, the fourth pillar is about developing infrastructure, while the fifth emphasises financial restructuring.
How can Pertamina play a role in restoring investor confidence in the local oil and gas industry?
SOETJIPTO: As the national oil and gas company, Pertamina can play a key role in increasing investor confidence in our energy sector, particularly given that the government is expected to give Pertamina rights to take on several blocks for exploration and production. Current investment requirements in our local refinery industry are at least $40bn. For upstream, we also need investments of not less than $60bn for the next 10 years, bringing the total amount to $100bn. However, Pertamina cannot make these investments alone. To attract further injections of capital in local industry, we need to improve sector transparency in the eyes of investors.
Which types of renewable energy present the best investment options in Indonesia today?
SOETJIPTO: Pertamina now has a director in charge of developing new sources of new and renewable energy. For example, we have 400 MW being produced through geothermal, and we aim to reach 1300 MW in the next five years. Given that 70% of Indonesia’s territory is covered by water, wave energy offers significant potential that should be explored. Solar, wind and biomass are of course other alternatives, but most of the discussion currently to develop renewable energy in Indonesia is to make it economically viable and feasible. We cannot give renewables the same treatment as traditional oil and gas. They remain different concepts, each associated with different risks and returns.
To what extent is Indonesia ready to move exploration activities to deeper waters?
SOETJIPTO: Indonesia has traditionally relied on onshore exploration and production, especially in western Indonesia. We have the technological capability and human capital required to exploit oil and gas onshore. However, Indonesia also needs to explore new greenfield projects, located in deepwater eastern Indonesia. The Offshore North West Java Sea and West Madura Offshore projects are the two major deepwater blocks for oil and gas backbone producers in Indonesia.
Two new projects are planned over the coming years, namely the Indonesian Deepwater Development in Makassar Strait and Masela Block in Banda Sea, with a potential gas rate of about 120-600m cu feet per day. Those above facts mean that Indonesia is ready to move forwards with exploration activities to deeper waters.
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